risk aversion

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Related to CARA utility: Risk aversion

risk aversion

n
a strong disinclination to take risks
References in periodicals archive ?
We have simulated the approximation under conditions of CRRA and CARA utility, to examine its robustness to various parameter changes.
48 (a) Calculations assume initial wealth of $650, a potential gain of $250, and a potential loss of $250 Table 3 Simulation results for CARA utility (a) Probability Expected Risk Theta of gain wealth Variance premium 0.
An advantage of the CARA utility function is that many commonly used utility functions are convex combinations of CARA utility functions (Brockett and Golden, 1987; Thistle, 1993).
One seemingly restrictive assumption in this model is that each individual has a CARA utility function.
However, risk premiums are independent on wealth when restricted to the class of CARA utility functions(3), and thus: (4) V = CE ([d|.